The Saint John Police Commission has reached an agreement with the union representing the city's police officers, just as binding arbitration hearings were beginning.
The three-year deal, reached on Wednesday, provides a 4.5-per-cent hike, retroactive to Jan. 1, 2013, followed by increases of 3.75 per cent in each of the consecutive years.
But it allows for lay-off provisions of employees hired after Nov. 1, 2011, turning a number of traditionally sworn police positions into civilian positions and "operational efficiencies and improvements" that helped reduce contract costs, said Jonathan Franklin, the board chair, without elaborating.
The deal "reflects compromise on both sides, improves community and officer safety while respecting the economic climate," he said.
New contract talks were launched on Tuesday.
Police union president Jamie Hachie said the two sides had just sat down with arbitrators when they decided to take one last crack at negotiation.
"I believe that wholeheartedly, the arbitration process is not beneficial to either side in my opinion. This is something that everyone can live with," he said.
The contract was ratified by both the commission and the Saint John Police Association during emergency meetings on Wednesday night.
It follows a two-year contract in which the police union took zero increases both years.
The union, which represents about 149 officers, had applied to the provincial government for arbitration in September.
In January, Saint John city council voted to look at the process and costs involved in switching to the RCMP for policing.
But Saint John did not meet the criteria. A municipality not previously policed by the RCMP must have a population of less than 15,000 people to be considered by Public Safety Canada, officials had said.
Last June, Saint John council voted unanimously to promote the idea of creating a regional police force.
But the proposal was quickly shot down by the Fundy Regional Service Commission.
The 2014 police budget increased by $1 million to almost $24 million.
The Saint John Police Force represents about 13 per cent of the city's overall budget.